Taking out a loan: be optimally prepared with our support

Core requirements for taking out a loan

A complex set of criteria applies when borrowing in Switzerland. The values of these criteria are assessed differently by each provider.

On top of legal requirements, each lender applies so-called risk criteria or, more technically, his scoring. The providers decision if he grants you a loan and usually which interest rate he will charge you is based on this scoring assessment.

1. Legal framework

Legal capacity to borrow

The Consumer Credit Act governs the legal capacity to take out a loan. It provides that you must be able to repay the full loan amount within 36 months from your disposable income, regardless of whether the agreed loan term exceeds three years. The rule is designed to protect borrowers from taking on too much debt. Although the Consumer Credit Act only requires this legal capacity check for loans up to CHF 80,000, banks will also perform an affordability check for higher loan amounts.

When you complete our enquiry form, we provide a rough, non-binding estimate of your borrowing capacity.

Minimum age 18

The minimum age is a legal requirement: no loans may be granted to minors. This is a temporary exclusion until the age of majority is reached.

2. Restrictions due to young or old age

Restrictions up to the age of 25

Expect certain restrictions up to the age of 25, but depending on the provider. The restrictions mainly affect the amount of the loan granted or the interest rate offered. Young borrowers are often assessed as higher risk, as their employment situation is typically less established. The advertising convention requires the lending sector to refrain from advertising to people under the age of 25, in order to protect them from over-indebtedness.

The chance of approval declines as age increases

Access to credit generally becomes more restricted with age. In general, the statistical risk of default increases. Age-related risk assessment may result in shorter loan terms or mandatory repayment before a certain age; in most cases, taking out a loan is not permitted after the age of 70.

Above all, retirement affects statutory borrowing capacity: the AHV pension is only partially attachable, or not at all, and may therefore not be fully taken into account as income.

3. Affordability and credit limit: determined by the amount and type of income

Income

A stable income is crucial for loan affordability and is taken into account when calculating the credit limit. Different types of income and employment are assessed differently:

• Permanent work: An ongoing, permanent employment relationship is considered the most stable form of income. The probationary period must have been successfully completed. In addition, length of employment or frequent job changes can affect loan conditions.
• Fixed-term or temporary employment: A loan is not ruled out in such cases, but the income situation is examined more closely. Not all lenders accept fixed-term or temporary employment contracts.
• Hourly wage employment: Income predictability is limited in the case of hourly work. Whether a loan is possible depends on the effective income earned over a longer period.
• Self-employed: Self-employed individuals must provide evidence of stable income and often have to observe certain waiting periods. However, borrowing is possible with some providers under certain conditions.
• In addition to employment income, other income and expenses (e.g. alimony, pensions) are also taken into account when assessing legal capacity and credit limits.

4. Credit and payment history

• Credit score and creditworthiness: Providers assess your creditworthiness to decide whether you will be granted a loan and under what conditions (amount, interest rate).
• ZEK entries: A core element in assessing creditworthiness are entries in the ZEK, which contain both positive and negative records as well as information on payment behaviour for loans, credit cards and leasing.
• Repayment history and creditworthiness: Negative events, such as late payments or other indicators of adverse payment behaviour, can affect your creditworthiness. A positive repayment history, on the other hand, can improve your chances of obtaining a loan.
• Debt collection – current or past: Outstanding debt collection proceedings temporarily prevent borrowing. For settled collections, the assessment depends on how many occurred, whether they have been fully settled, and how long ago they took place. Enforcement proceedings always have an adverse effect and can lead to exclusion from borrowing. If you are subject to ongoing debt collection proceedings, your loan application will be rejected.
• Bankruptcy, garnishment, promissory notes: Bankruptcy, garnishments, and in most cases promissory notes, are grounds for exclusion from borrowing. You are barred from borrowing for an extended period.

5. Lenders’ statistical risk assessment

Lenders apply a complex set of risk criteria to assess your creditworthiness and the risk of default. Examples include:

• Nationality or residence status: Liechtenstein nationals and holders of a C residence permit are generally treated in the same way as Swiss nationals. For other permits (B, G, F, N, L), you should expect restrictions or possible rejection. Not every lender accepts these permits; a minimum length of stay is often required, and additional conditions may be imposed on the customer profile.
• Other factors: Your place of residence, length of residence, time in your current employment, and marital status may also play a role. These factors provide lenders with indications of your overall stability, but they are weighted and interpreted differently depending on the lender.

6. Supporting documents

The key documents typically required to show your personal and financial situation:

• Passport, identity card, or residence permit/foreigner’s identity card
• As a minimum, wage statements for the last three months (for permanent employment; otherwise often for a longer period)
• Depending on the lender, a rental agreement or confirmation of sublease may be required
• Depending on the individual situation, additional evidence may be required (e.g. for alimony or other additional income and expenses)
• For self-employed individuals: a tax assessment
• In the event of a replacement: information and documents relating to the existing loan.
• In the event of a replacement: Information and documents on the existing loan

Common reasons for refusal

You do not meet the legal capacity criteria: The Federal Law on Consumer Credit (FLCC) stipulates that you must be able to repay a loan within 36 months from freely disposable, attachable income. For this assessment, your budget will be calculated in accordance with FLCC criteria. If you are unemployed, receive IV or social assistance, or are an AHV pensioner, either your income situation makes a credit rating clearly impossible, or the type of income is not attachable.

Ongoing debt collection proceedings: Such proceedings result in rejection. Settled collections that are still recorded in the official debt collection extract have a negative effect and may lead to rejection. Repeated enforcement proceedings, or even garnishments, promissory notes, or bankruptcy, lead to long-term exclusion from borrowing.

Payment history and negative ZEK entries: In addition to debt collection records, data on your creditworthiness and repayment behaviour is also stored in credit databases. The ZEK records information on your current and past loans, leasing agreements and credit card contracts, which can affect your credit approval.

Employment relationship: If you are not employed on a permanent basis and your probationary period has expired, additional restrictions and deadlines apply in the case of fixed-term, temporary or self-employment.

Loan illustration

Loan amount of CHF 25'000. Effective annual interest rate of 1) 4.9% to 2) 9.95%. Over 36 months, this generates interest or costs of 1) CHF 1'890.36 to 2) CHF 3'839.39 and a monthly instalment of 1) CHF 746.95 to 2) CHF 801.09.

Swiss Lenders offer terms from 6 to 120 months.